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Rising And Falling Three Methods

14/05/2013 Mircea Vasiu [youtube_post]0bZje0Kjjjs[/youtube_post]

The three methods can be, of course, bullish or bearish, or rising and falling, and they both fall into the category of continuation patterns. It is mandatory to understand what a continuation pattern means, and that is, in a bullish market, when price coming from the downside and enters a continuation pattern, it usually has the tendency to exit the pattern into the same direction it entered it. The same is valid for bearish continuation patterns.

The rising three methods is composed of a first long green bullish candle, followed by three falling red candles, usually with a small real body, and this group of red candles should be follow by a last long bullish (green) candle with a strong body. The number of the falling candles might be bigger than three, and this is acceptable also, as long as the other candles that form the pattern are respecting the rules. The falling three methods looks the same but in reverse, meaning that in a falling trend, after a strong red candle, you have three green candles with a small real body and the last candle in the pattern is a strong red candle. If you want to compare them with something from the Western technical analysis approach I would say they are resembling the most with bullish and bearish flags, but I personally have many objections when comparing them.

Rising and falling three methods pattern it is usually forming way above/below the previous top/bottom, often being associated with triangles, or with 4th wave types on the Elliott Waves theory. So while they are a continuation pattern, the measured move once the pattern completed should not offer a great reward, but nevertheless points toward more action in the initial direction of the pattern.